Employment Law

In Equal Pay Push, EEOC to Collect Pay Data From Employers

Why it matters

On the anniversary of the Lilly Ledbetter Fair Pay Act, President Barack Obama announced that the Equal Employment Opportunity Commission (EEOC) will further the push for equal pay by requiring employers to report pay data. "More than 50 years after pay discrimination became illegal it remains a persistent problem for too many Americans," EEOC Chair Jenny R. Yang said in a statement. "Collecting pay data is a significant step forward in addressing discriminatory pay practices. This information will assist employers in evaluating their pay practices to prevent pay discrimination and strengthen enforcement of our federal anti-discrimination laws." In addition to data about race, ethnicity, sex, and job category of employees already provided in the Employer Information Report (EEO-1), the EEOC proposed to add data on pay range. Beginning with the September 2017 annual report, employers with more than 100 employees would be required to identify employees' total W-2 earnings for a 12-month period looking back within the pay bands established by the Bureau of Labor. The new EEO-1 requirement—currently open for public comment—certainly adds to employers' reporting duties but could also lead to litigation or enforcement actions from the agency, with Secretary of Labor Thomas E. Perez calling the data collection "a more powerful tool" for the government to perform its enforcement work and "root out discrimination where it does exist."

Detailed discussion

Continuing his push for equal pay, President Barack Obama celebrated the seventh anniversary of the Lilly Ledbetter Fair Pay Act—the first piece of legislation he signed into law—with a renewed commitment to equal pay. At his direction, the Equal Employment Opportunity Commission (EEOC) proposed a revision to the Employer Information Report (EEO-1) that would require employers to report information about the wages paid to their workers.

Each year, private employers with at least 100 employees (and federal contractors with 50-99 workers) are currently required to file an EEO-1 report, sharing the number of individuals they employ by job category and by race, ethnicity, and sex. The report—delivered to the EEOC and the Department of Labor's Office of Federal Contract Compliance Programs (OFCCP)—contains seven race and ethnicity groups and ten job categories, ranging from Executive/Senior Level Officials to Service Workers.

Pursuant to the proposed revision, both federal contractors with 50-99 workers and private employers with 100 or more employees would additionally submit pay data as of the September 30, 2017, filing deadline. Specifically, employers would share employees' total W-2 earnings for a 12-month period, looking back for the period between July 1 and September 30.

Using W-2 earnings makes sense because the statements include wages and salaries as well as other compensation information—commissions, tips, taxable fringe benefits, and bonuses—the EEOC explained. This method would also account for part-time workers, employees that worked for less than a full 12 months, and those with W-2s from multiple employers, the agency added.

Within the ten EEO-1 job categories, the proposal would have 12 pay bands, starting at $19,239 and under and working up to $208,000 and over. So an employer would report that it employs ten African-American men who are Craft Workers in the second pay band ($19,240 to $24,439), for example.

Although the agency considered other options for reporting pay data—including reporting it at the individual employee level—the EEOC opted to use pay bands, which it said would allow it to compute within-job-category variation, across-job-category variation, and overall variation, which would help the agency discern potential discrimination while still preserving confidentiality.

The collection of pay data will serve a twofold purpose, the agency explained. The data could help employers evaluate their own pay practices to prevent pay discrimination and will also be used by the federal government to combat the problem.

"We can't know what we don't know," Secretary of Labor Thomas E. Perez said in a statement. "We can't deliver on the promise of equal pay unless we have the best, most comprehensive information about what people earn."

Data collected from the proposed revisions to the EEO-1 will be used "to more effectively focus investigations, assess complaints of discrimination, and identify existing pay disparities that may warrant further examination," EEOC Chair Jenny R. Yang noted.

The federal government isn't alone in its focus on equal pay. States have also jumped on the bandwagon, with California and New York recently enacting equal pay laws.

To read the proposed revision to the EEO-1, click here.

To read the EEOC's Questions and Answers document about the proposed changes, click here.

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EEOC Releases New Guidance on Retaliation

Why it matters

For the first time in almost 20 years, the Equal Employment Opportunity Commission (EEOC) released proposed guidance on the issue of workplace retaliation, requesting public comment on the 76-page document. Why now? The increase in retaliation claims, the agency explained, with almost twice as many filed since 1998, making retaliation the most common allegation filed with the EEOC. "Retaliation is a persistent and widespread problem in the nation's workplaces," agency Chair Jenny R. Yang said in a statement. "Ensuring that employees are free to come forward to report violations of our employment discrimination laws is the cornerstone for effective enforcement. If employees face retaliation for filing a charge, it undermines the protections of our federal civil rights laws." While the EEOC said it was not making any interpretive changes, employment attorneys may have reason to be concerned with some of the language found in the proposed guidance. For example, retaliation can be established by a "'convincing mosaic' of circumstantial evidence that would support the inference of retaliatory animus," the agency wrote in the document, which could leave employers facing an uphill battle to defend against the claims.

Detailed discussion

Citing a significant rise in the filing of retaliation claims by workers, the Equal Employment Opportunity Commission (EEOC) released proposed enforcement guidance for employers. The last time the agency issued guidance on the subject: 1998. Since then, the percentage of retaliation charges has almost doubled to make retaliation the most frequently alleged type of violation raised with the EEOC.

In fiscal year 2014, for example, almost 43 percent of all private sector charges included retaliation claims; in the federal sector, retaliation has been at the top of the list of claims since 2008 and comprised 53 percent of the violations for fiscal year 2015.

With such figures in mind, the EEOC determined to offer additional guidance to employers. The "Proposed Enforcement Guidance on Retaliation and Related Issues," while not an administrative rule or official decision, serves "as a reference for Commission staff investigating charges alleging retaliation and related issues under all the statutes EEOC enforces," and "may be useful to EEOC staff conducting outreach, and to employers, employees, and practitioners seeking to learn more about this area of the law," the agency said.

A retaliation claim has three elements, the EEOC wrote: protected activity (such as participation in EEO activity or opposition by the individual to discrimination), adverse action taken by the employer, and a causal connection between the protected activity and the adverse action.

The agency noted that protected "opposition" activity encompasses a broad range of "ways in which an individual may communicate explicitly or implicitly" their opposition to perceived employment discrimination. For example, an employee identified as a witness in an internal investigation of a coworker's sexual harassment allegation who provides corroborating information during an interview engages in protected opposition, even if she does not lodge a complaint of her own.

The EEOC took an equally broad stance on causation. "The charging party may discredit the defendant's explanation and demonstrate a causal connection between the prior protected activity and the challenged adverse action by what one appellate court has described as a 'convincing mosaic' of circumstantial evidence that would support the inference of retaliatory animus," according to the guidance.

Playing out in the workplace, the EEOC used an example of a worker that alleges a supervisor denied her a promotion because she opposed the underrepresentation of women in management jobs and was viewed as a "troublemaker." The employer counters that the person selected for the promotion was better qualified for the position because she had a master's degree and the complainant only had a bachelor's degree. An EEOC investigator could find reasonable cause to believe that the employer's explanation is pretextual because the complainant has significantly greater experience working at the company, the agency said, which has long been the employer's most important criterion for selecting managers.

In addition to the written explanation of the EEOC's position and dozens of examples, the guidance featured best practices for employers to minimize the likelihood of retaliation violations. "To reduce the incidence of retaliation, employers can recognize both the potential for retaliation and the interaction of psychological and organizational characteristics that contribute to the likelihood of retaliation," the agency wrote. "While each workplace is different, there are many different policy, training, and organizational changes that employers may wish to consider implementing to achieve this goal."

Employers should maintain a "written, plain-language anti-retaliation policy" with topics such as proactive steps for avoiding actual or perceived retaliation, examples of retaliation that managers may not otherwise realize are actionable, a reporting mechanism for employee concerns, and a "clear explanation" that retaliation can be subject to discipline, up to and including termination, the agency suggested.

Training (for managers, supervisors, and employees) as well as anti-retaliation advice and individualized support—with proactive follow-up to "identify issues before they fester"—should also be automatic parts of an employer's response and investigation following EEO allegations, the EEOC advised.

To read the EEOC's draft guidance, click here.

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Misclassification Suit Against Lyft Brakes Into Settlement Deal

Why it matters

To settle charges in California federal court that its drivers were mischaracterized as independent contractors and not employees, ride-sharing company Lyft has agreed to pay $12.25 million—but refused to alter the classification of its drivers going forward. Requesting preliminary approval of the deal, the class revealed that Lyft also promised to make changes to its terms of service that will provide drivers with greater protections, such as removing the current at-will termination provision and providing that Lyft will bear the costs of arbitration for claims brought by drivers related to certain issues (deactivation of driver status, payment, or employment relationship). The non-reversionary settlement fund will be paid out to class members at different rates, with those who drove for 30 hours or more each week for more than half of the weeks at issue receiving larger payments than those with fewer hours. In a statement, class counsel acknowledged that the deal "does not achieve everything we had hoped for," but said it "will result in some significant changes that will benefit the drivers." Lyft's general counsel said the company was "pleased to have resolved this matter on terms that preserve the flexibility of drivers to control when, where and for how long they drive on the platform and enable consumers to continue benefitting from safe, affordable transportation." Competitor Uber is facing similar litigation, with trial set for June.

Detailed discussion

In 2013, a group of drivers filed suit against Lyft, Inc., accusing the ride-sharing company of violating multiple provisions of California's Labor Code. In addition to misclassifying them as independent contractors and not employees, the plaintiffs alleged, Lyft failed to reimburse them for work-related expenses, pay the required minimum wage, and neglected to furnish accurate wage statements.

The parties engaged in discovery and pretrial motions before mediating the case and reaching a settlement agreement. The deal features a non-reversionary payment in the amount of $12,250,000 as well as forward-looking nonmonetary relief in the form of changes to Lyft's business practices.

Specifically, the employer agreed to remove the current at-will termination provision and replace it with one that allows Lyft to deactivate drivers from its system only for specific, delineated reasons or after notice and an opportunity to cure. In addition, the revised terms of service will provide that Lyft will pay for the arbitration fees and costs unique to arbitration for claims brought by a driver against the employer related to a driver's deactivation, pay-related issues, or alleged employment relationship with Lyft.

Other protections for drivers include the creation of an option that will allow riders to designate their "favorite" driver, a selection that will entitle the driver to additional benefits. "Together, the non-monetary changes provide Drivers a real benefit and a practical mechanism through which they can challenge terminations that they contend violate Lyft's contract and disputes relating to compensation," according to the plaintiff's motion for preliminary approval of the settlement agreement.

As for payment of the fund, the plan of allocation is based on a points system to reflect the amount of work performed by drivers. Each driver that submits a claim will be allocated a number of points reflecting the amount of time he or she was in "Ride Mode," including the time when a driver was en route to pick up a rider, after accepting a ride request, and the time spent actually transporting a rider.

This base number of points will be enhanced under two circumstances: a 50 percent increase for drivers who worked more than 30 hours per week in at least 50 percent of their weeks worked (class members who arguably have the strongest claims on the merits) and a 20 percent bump for those who drove during a specified time period when payments for rides were voluntary.

The decision to settle was based in part upon the risks of continued litigation, the motion noted, including the challenges presented by Lyft's arbitration provision. Approximately 75 percent of the drivers are subject to an arbitration agreement that features an express class action waiver, presenting a "roadblock" in the case and "hurdles" to class certification.

The plaintiffs acknowledged that the settlement did not resolve the central issue of the dispute but argued it offered a positive deal for the drivers. "While the agreement does not require Lyft to reclassify its Drivers as employees, it will provide significant benefits and added protections to Lyft Drivers that they do not currently have, require changes to Lyft's business practices that are more consistent with an independent contractor relationship, and provide monetary relief proportional to both the strength of the Drivers' claims and the amount of time they have driven for Lyft," according to the motion.

To read the motion in support of preliminary approval of the settlement in Cotter v. Lyft, Inc., click here.

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DOL Issues Guidance on Joint Employment

Why it matters

In a new Administrator's Interpretation, the Department of Labor (DOL) has adopted an incredibly broad test for joint employment under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The guidance—accompanied by a Question and Answer document and a new fact sheet—"ensures that the scope of employment relationships and joint employment under the FLSA and the MSPA is as broad as possible," the agency emphasized. In the current workplace, "there is increasingly the possibility that more than one employer is benefiting" from an employee's work, the DOL explained, highlighting industries such as construction, staffing, hospitality, healthcare, agriculture, and janitorial. The new standard uses the FLSA's expansive definition of "employ" as "to suffer or permit to work" and rejects the common-law right of control standard. Joint employment relationships can be either horizontal—when two or more employers each separately employ a worker and are sufficiently associated with or related to each other with respect to the employee—or vertical, where the employee of the intermediary employer is also employed by another employer. Employers would be well-served to familiarize themselves with the guidance to avoid an enforcement action from the DOL, which noted that it "will continue to consider the possibility of joint employment to ensure that all responsible employers are aware of their obligations and to ensure compliance with the FLSA and MSPA," to further the remedial purpose of the statutes.

Detailed discussion

Recently, the Department of Labor's (DOL) Wage and Hour Division (WHD) has encountered an increase of joint employment scenarios, prompting the agency to issue Administrator's Interpretation No. 2016-1 (AI). Situations where more than one business is involved in the work being performed and where workers have two or more employers are increasingly common, the agency noted, with the sharing of employees, third-party management companies, independent contractors, staffing agencies, or labor providers.

With joint employment more common, the DOL felt the need to provide additional guidance on employees' rights and employers' obligations under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). "When two or more employers jointly employ an employee, the employee's hours worked for all of the joint employers during the workweek are aggregated and considered as one employment, including for purposes of calculating whether overtime pay is due," according to the guidance. "Additionally, when joint employment exists, all of the joint employers are jointly and severally liable for compliance with the FLSA and MSPA."

Further, where one joint employer is larger and more established, with a greater ability to implement policy or systemic changes to ensure compliance, "WHD may consider joint employment to achieve statutory coverage, financial recovery, and future compliance, and to hold all responsible parties accountable for their legal obligations."

The DOL emphasized that the concept of joint employment—like employment generally under the FLSA's "to suffer or permit to work" standard—should be interpreted as broadly as possible. However, not every subcontractor or labor provider relationship will result in joint employment. To give employers a better grasp on what the DOL considers to be a joint employment relationship, the AI set forth two concepts: horizontal joint employment and vertical joint employment.

"Horizontal joint employment exists where the employee has employment relationships with two or more employers and the employers are sufficiently associated or related with respect to the employee such that they jointly employ the employee," the DOL said, with the analysis focused on the relationship between the employers.

Examples of horizontal joint employment may include separate restaurants that share economic ties and have the same managers controlling both restaurants, or home healthcare providers that share staff and have common management. Relevant factors when analyzing the degree of association between, and sharing of control by, potential joint employers include whether the employers have any overlapping officers, directors, executives, or managers; if the operations are intermingled; whether the employers share control over operations (such as hiring, firing, or advertising); and who owns the employers.

"In sum, the focus of the horizontal joint employment analysis is the degree of association between the two potential joint employers even if they are formally separate legal entities and the degree to which they share control of the employee," the DOL said.

So where an employee works at two locations of the same restaurant brand, where the managers share the employee and jointly coordinate her scheduling, use the same payroll processor, and share supervisory authority (and where the same individual is the majority owner of both locations, even though they are operated by separate legal entities), the facts are indicative of joint employment.

Alternatively, vertical joint employment examines the economic realities of the working relationship between the employee and the potential joint employer and exists "where the employee has an employment relationship with one employer (typically a staffing agency, subcontractor, labor provider, or other intermediary employer) and the economic realities show that he or she is economically dependent on, and thus employed by, another entity involved in the work."

A common vertical joint employment relationship can be found where a construction worker who works for a subcontractor is also employed by the general contractor, or a farmworker who works for a farm labor contractor is also employed by the grower. Typically, a contract or other arrangement will be present between the intermediary employer and the potential joint employer, the DOL added.

Seven economic reality factors (found in the MSPA regulations) can help guide the determination of whether a vertical joint employment relationship exists, with consideration of the directing, controlling, or supervising of the work performed; which party controls the employment conditions; the permanency and duration of relationship; the repetitive and rote nature of work; whether the work is integral to business; if the work is performed on the premises; and the performance of administrative functions commonly performed by employers.

The DOL provided examples of vertical joint employment, including a worker hired by a farm labor contractor to pick produce on a farm. Although the contractor hired and pays the worker, the grower dictates the timing of the harvest, which fields are to be harvested, and the schedule for each day. Any training for the work (which is generally unskilled) is provided by the grower, who keeps track of the amount of produce picked and provides the buckets and transportation. The grower pays the contractor but withholds money to cover workers' compensation. These facts are indicative of joint employment of the worker, the agency said.

"As a result of continual changes in the structure of workplaces, the possibility that a worker is jointly employed by two or more employers has become more common in recent years," the AI concluded. "In an effort to ensure that workers receive the protections to which they are entitled and that employers understand their legal obligations, the possibility of joint employment should be regularly considered in FLSA and MSPA cases, particularly where (1) the employee works for two employers who are associated or related in some way with respect to the employee; and (2) the employee's employer is an intermediary or otherwise provides labor to another employer."

To read the DOL's Administrator's Interpretation 2016-1, click here.

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New California Laws in Effect

Why it matters

California employers should brace themselves for a busy year. Several bills took effect as of January 1, 2016, including legislation that provided some much-needed clarity to the state's new law establishing paid sick leave, an amended equal pay bill shifting the burden of proving that an employee's higher rate of pay is based on factors other than gender to employers, recognition that a request for a reasonable accommodation based on religion or disability constitutes protected activity under the state's Fair Employment and Housing Act (including protection from retaliation), and the establishment of a safe harbor for employers with piece-rate workers. Although it took immediate effect last October, employers should also keep in mind a measure that permits the cure of potential violations under the California Labor Code for neglecting to provide certain information on wage statements.

Detailed discussion

Several new laws impacting California employers took effect as of January 1, 2016. Below is a summary of some of the major changes.

  • In 2013, a pair of appellate panels ruled in favor of piece-rate workers, recognizing that the employees should be paid separately for rest and recovery time in Bluford v. Safeway, followed by a decision in Gonzalez v. Downtown Motors requiring payment for other non-productive time, including substantial waiting time for work. With employers facing the potential for significant retroactively liability as a result of the decisions, the Legislature stepped in and passed Assembly Bill 1513. The law established a safe harbor for employers to avoid retroactive liability if they provide a fixed payment to their workers for periods between July 2012 and the present. Employers that provide such a payment to their workers have an affirmative defense to retroactive claims until January 1, 2021. In addition, the legislation provided a clear definition of the term "non-productive time," left unclear by the decisions, as "time under the employer's control, exclusive of rest and recovery periods that is not directly related to the activity being paid on a piece-rate basis." Employers were given options on how to calculate non-productive time, such as paying the minimum wage for each hour worked on top of the piece-rate pay or using a "reasonable estimate." Addressing another unanswered question from the Bluford case, AB 1513 recognized that the required rate of pay for rest periods should be based on the average pay received by an employee in any week including work paid on a piece-rate basis.
  • Although the state's Healthy Workplaces, Healthy Families Act took effect on July 1, mandating that employers provide three paid sick days per year for employees that have worked in the state for at least 30 days in a calendar year (regardless of whether they are full- or part-time workers), the law left employers with several unanswered questions. To provide clarity on certain issues, the Legislature enacted Assembly Bill 304. Specifically, the new bill made clear that the 30 days of work required to trigger paid sick leave must all be worked for the same employer. Employers were also provided with an option on how to pay sick days for nonexempt employees as well as methods of how to accrue paid leave—in lieu of the strict 1 hour per 30 hours worked, employers were offered the choice to use other accrual methods within certain parameters. If an employer already had a paid sick leave or paid time off policy in existence that satisfied the requirements of the Act as of January 1, 2015, AB 304 clarified that the employer was not required to provide additional paid sick days.
  • Touted as the toughest law of its kind in the nation, Senate Bill 358 expanded California's Fair Pay Act by shifting the burden to employers to prove that an employee's higher rate of pay is based on factors other than gender and providing employees with the ability to sue if they are paid less than coworkers of a different gender performing "substantially similar" work. As originally enacted in 1949, the statute provided that an employer may not pay an employee at a rate less than that paid to employees of the opposite sex in the same establishment for equal work performed on equal jobs. The new law lowered the burden on employees by requiring them to prove only that they received lower wages for "substantially similar" work and by eliminating the "same establishment" requirement. The new law identified limited circumstances where an employer can show that wage disparity is based on a legitimate factor other than sex. Only a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than sex (such as geographic location, education, experience, or training) will suffice. Employers were also hit with record-keeping requirements to maintain records of wages and wage rates, job classification, and related terms and conditions of employment for a three-year period. SB 358 added a prohibition regarding retaliation and bans employers from interfering with workers' ability to discuss and share information about their wages.
  • Employers will want to review their wage statements in light of a new law that took immediate effect last October permitting the cure of potential violations that could lead to a lawsuit under the Private Attorneys General Act (PAGA). An employer may be liable under the California Labor Code for neglecting to provide certain information, including the name and address of the legal entity that is the employer and the inclusive dates of the pay period, in an employee's wage statement, with damages of up to $200 per pay period for violations, plus attorneys' fees and costs. The new law, Assembly Bill 1506, provided employers with the right to cure such a violation with a showing that every employee received a "fully compliant, itemized wage statement" for each pay period for the three-year period prior to the date of the employee's written notice. The right to cure is not unlimited, however, with employers allowed just one opportunity per 12-month period to fix any mistakes and a 33-day window to correct the error upon notice from an employee identifying wage statement defects before liability attaches. AB 1506 is limited to just two specific subsections of the California Labor Code, Section 226(a)(6) and Section 226(a)(8), although the Code requires employers to provide additional information on wage statements.
  • Initiated in reaction to a decision from a California appellate panel, Assembly Bill 987 amended the Fair Employment and Housing Act (FEHA) to provide protections for employees who make a request for an accommodation for a disability or religion. The issue arose in a case that began when an employee requested a leave of absence to donate a kidney to his sister five months prior to the surgery. Two months before the surgery the employee was terminated. He sued for associational disability discrimination under FEHA, but the appellate panel in Rope v. Auto-Chlor System of Washington affirmed dismissal of his suit, holding that "a mere request—or even repeated requests—for an accommodation, without more" does not constitute protected activity sufficient to support a claim for retaliation in violation of FEHA. AB 987 amended the statute to establish that "[a] request for reasonable accommodation based on religion or disability constitutes protected activity … such that when a person makes such a request, he or she is protected against retaliation for making the request."

To read AB 1513 (workers' compensation and piece-rate compensation), click here.

To read AB 304 (sick leave: accrual and limitations), click here.

To read SB 358 (gender wage differential), click here.

To read AB 1506 (PAGA amendment to cure labor code violations), click here.

To read AB 987 (FEHA amendment), click here.

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Complimentary Webinar: Managing International Data Transfer Risks in Employment Screening

In light of the invalidation of the Safe Harbor agreement by the EU's highest court, many unanswered questions remain regarding the management of international data transfers. For HR and legal departments of U.S. companies that operate overseas or hire employees who worked or attended school outside of the country, the privacy and data protection challenges are particularly vexing.

Join Manatt partner Rebecca Torrey and Joann Gold of Scherzer International as they explore the multiple layers of complexity involving international data transfers and background screens and provide compliance strategies to diminish related risks.

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